Tax Questions and Answers

I’ve focussed so much on growing my new business, I haven’t kept up with the tax side of things. Now it’s May 2018 and I still haven’t filed my 2016/17 tax return. What penalties am I facing?The deadline for filing 2016/17 tax returns was 31st January 2018 (31st October 2017 if you were filing on paper). Failing to meet this deadline incurs a £100 penalty even if there is no tax due.

Further delay can result in additional penalties being incurred as follows• Three months late (30/4/2018 online 31/1/2018 paper): additional daily penalties of £10 per day up to a maximum of £900• Six months late (31/7/2018 online 30/4/2018 paper): a further penalty of the greater of 5% of the tax due or £300• Twelve months late (31/1/2019 online 31/10/2018 paper): another penalty of the greater of 5% of the tax due or £300. At this stage HMRC, if they judge the case to be serious enough, can levy penalties of up to 100% of the tax due.

These penalties are cumulative, so it is possible to incur penalties of up to £1,600 from simply not filing, even where no tax is due.

If tax is due, you will be liable for interest and late payment penalties as well depending on when you actually pay the tax. As a new business, your first tax payment will have been due 31/1/2018. Depending on your tax liability, you may also be required to make a payment on account on 31/7/2018.

You should ensure you file your tax return as soon as possible to stop the penalties rising. This should be done online if at all possible, as a paper return will attract penalties based on the earlier deadline. Engaging an accountant, who can submit online on your behalf and appeal penalties, is probably advisable.

I have been labouring on building sites for a while now. One of my mates mentioned that he’d got a big tax refund. Can I get one as well?If you are engaged as an individual working on building sites, but not as an employee, then you will be self-employed. This means that you have to submit a tax return to HMRC every year to report your business profits. If you started before 5/4/2017, then you should already have submitted a return (see previous question). If you started after this date, your first return will be due for filing on 31/1/2019.

You need to ensure you are registered as self-employed and have a Unique Tax Reference (UTR). Once you have this you should also register for the Construction Industry Scheme (CIS) as a subcontractor. This can be done by calling 0300 200 3210. If you do not register, contractors will deduct 30% tax from your pay. If you do register, they will only deduct 20% tax from your pay. Any amount deducted is paid to HMRC to offset against your tax and National Insurance bill.

On your return you report your income for the year, before deduction of tax. From this you can deduct expenses related to that income, such as the costs of protective clothing or fuel to get to site. The amount left after these deductions is your income for tax and National Insurance purposes.

Because of the tax-free personal allowance, and the deduction of expenses, the tax taken up front from CIS subcontractors is often higher than their final tax bill. The excess amount is reclaimed when you submit your return, which you can do any time after 6/4/2018. If your income is high enough to generate a tax bill, this is still due for payment on 31/1/2019, no matter when the return is submitted.

• For assistance with these, or any other tax or accounting matters, call Steve Brown at Coleman Webb on 01424 211800 to arrange a free, no-obligation appointment to discuss your needs.

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